Help on an idea I thought (Real Estate)

[JJChicken]

I earn $70k a year approx, expecting to go up in $10k increments.

There's an apartment on sale for $580k, near the city and is currently being leased out for $550/week. This is a prime location so I expect to be easily find tennants.

Assume interest rate is 8%. I have little to no principal.

Should I buy the place & rent it out?

Essentially I'll pay 46,400 a year in interest, and get back 28,600, i.e. a net differential of $17,900. Noting this is tax deductible, so the tax benefit to me is approximately $7k. So I am out of pocket each year by $10k.

But, the property prices should rise right? So lets assume it doubles in 10 years. I would have paid out $100k. But I will get $580k. That gives me a net gain pre-tax of $480k. Assume I pay 40% tax on this, so it gives me an after tax profit of $288k...

How AWESOME is that?? I guess the only problem is I'm betting my life on this investment idea..

Now analyse bitches!

 

[JJChicken]

I don't live in US BTW so the tax rates/interest rates are going to be different.

 

[Dr. Detroit]

Does property always increase in value?

Gambling with real estate is the same as gambling with the stock market, sometimes you win and sometimes you lose.

 

[dawp]

Does property always increase in value?

Gambling with real estate is the same as gambling with the stock market, sometimes you win and sometimes you lose.

Why don't you ask a homeowner who is underwater with his loan right now.

most of the time yes, but when it crashes, it crashes big. and with something like this, that is a big bag to hold.

 

[JJChicken]

Agree with you both. Thing is, this is Sydney we're talking about. The apartment is like your downtown NY type of location. So it will have pretty stable price/rent.

However, I'm now highly doubting to get the property to double in value because its an apartment. If it was a house, it should double, but not an apartment.

But yeah, I probably won't do this investment cause its too big of a risk. But definately down the track, such an idea sounds viable. Great for cutting down taxes!

 

[guyver01]

I There's an apartment on sale for $580k, near the city and is currently being leased out for $550/week. This is a prime location so I expect to be easily find tennants.

Is the apartment currently occupied? If not.. how long has it been unoccupied?

If it's occupied, how long have there been tenants? Was/Is there any long period without occupation?

Landlords make their money by having high occupancy. You dont want anything that is known to not have a high occupancy rate.

 

[dawp]

also, look into how well it was maintained, if they let it go, it could be a money pit and cost a lot to get it back up to code.

 

[wiredspider]

Just bet it all on black.

 

[Jumpem]

You'll never get approved for a $580k loan on a $70k income. At that income I would be shopping in the $70-100k range.

 

[TheSlamma]

Sounds like a great deal for your employer, that kind of debt would keep you strapped down and NEEDING that job more then anything.

 

[olds]

You don't make enough to buy a 580k anything.

 

[boomerang]

Down payment?
In the U.S. you're going to pay a higher interest rate for a loan on commercial property. Where you're at - ?
Property taxes?
Maintenance?

 

[amdhunter]

Sounds like a great plan. Do it.

 

[nerp]

Without a lot of money down and your income, keep dreaming.

 

[geno]

I earn $70k a year approx, expecting to go up in $10k increments.

There's an apartment on sale for $580k

Stop right there.